The measures taken by the central bank in March are working as expected. The bank is prepared to scale up bond purchases again if necessary to achieve the yield curve target, Lowe said a webinar on Thursday.

At the March meeting, the bank had reduced the cash rate to 0.25 percent and unveiled a bond purchase programme and a three-year funding facility.

However, there is a limit to what can be achieved with monetary policy, Lowe said today.

The governor observed that one obvious source of uncertainty is the pace at which the various restrictions to control the spread of Covid-19 are eased. Another is the level of confidence that people have about their future, both in terms of their health and their own finances.

Responding to a question during an online panel discussion, Lowe said the recovery will be slow without a Covid-19 vaccine. He noted that the confidence is fragile and restoring it is important.

Regarding negative interest rate, Lowe said it is "extraordinarily unlikely" as the costs of that exceed the benefits.